Feb

3

One notes that decay of net worth as a function of marriage # doesn't make a dollar of $10M until spouse 25.

Rocky Humbert writes: 

Being an optimist, I note that there is a questionable assumption in Kim's chart that is relevant to the markets:

It presumes that each and every spouse has a diminutive effect on wealth. I see no a priori reason why all spouses should have a diminutive effect on post-divorce wealth. In fact, if one marries (and divorces) an infinite number of spouses, one should also benefit from some number of positive divorce settlements. This must be true, since it's a zero sum game (net of legal fees), and if you managed to marry EVERY woman at least once, there's an asymptotic function approaching the original wealth of all parties (less legal fees).

The market analogy/problem: what is the asymptotic P&L if you buy an infinite number of out of the money puts and calls — versus selling an infinite number of the exact same out of the money puts and calls? Theoretically, (net of transaction costs), it should be a zero sum game with an uncertain path. But it's the path that really matters….

Phil McDonnell writes: 

In one sense the options are a zero sum game. That is when we consider that every option that wins is pretty much paid by an option that loses. As usual we ignore taxes and vig which would turn it into a negative sum game.

But the net sim is only part of the question. It is also possible for the buyers of options to mostly lose. Suppose we buy both a put and a call struck at 50 when the stock is at 50. Both will lose time value which they initially held when bought. At expiration all time value will be gone and they will trade point for point with the difference of the stock from 50.

The reverse is true for sellers they will tend to capture time value.

 


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